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France country profile 2017 : economic outlook, weaknesses and strengths, structural reforms

- June 2017


Ahead of the French parliamentary elections, we review the main economic issues the new government will have to tackle. In this report, we assess the main weaknesses and strengths of France on a macroeconomic perspective. We review the state of structural reforms and their first results. We finally identify the challenges ahead for the new president and the relevance of his economic program.

Up to now, the rebound of activity in France has mainly been a story of increase in purchasing power of households helped by a decrease in oil prices and the drop in interest rates. Those different impulses are nevertheless fading away and have to be replaced by a self-sustaining process associated with employment growth and a regular increase in productive investment.

France has a more stable trend of economic growth than most other countries in Europe but also a softer one.
- On a supply side perspective, the very lacking engine for growth in the last decade is productivity.
- On the demand side, a lack of competitiveness has put the most severe drag on growth for almost two decades. Any recovery will be highly reliant on the ability to restore cost and quality competitiveness.

Challenges : Taxation, Competitiveness, employment ...
As regards the main issues that the French economy has to address (competitiveness, public finance and high structural unemployment), we focus on fiscal aspects, trends of cost and non-cost competitiveness, labor market issues and ways of reform of retirement pensions schemes.

Table des matières :

Situation of the French economy

- Demography and population projections: a younger population but less mobilized in the workforce
- The French productivity puzzle
- Growth trends: a potential growth close to 1% per year
- Short term perspective: in search of endogenous engines for growth

Main imbalances and main strengths

- Public accounts
- External accounts
- The low level of CO2 per inhabitant
- The top-flight transport infrastructure network
- High level of savings

Challenges and solutions

- Taxation
- Cost competitiveness
- Innovation and quality competitiveness
- Ways of reform of the labor market
- Functioning and prospects of the French pension system.

Is Emmanuel Macron’s program up to the main French economy challenges?

- Insufficient employment
- Weak productivity gains
- Excessive tax weight on production


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